Addressing the illicit flows of tobacco in Australia

In 2018–19, Australia is taking a number of significant steps to address the illicit trade in tobacco. In the context of ongoing aggressive tobacco tax increases, the new measures now rolling out will strengthen the administration of tobacco imports and create a multi-agency taskforce to increase investigatory and enforcement capability, among other advances. Australia has earned a reputation for innovation in anti-smoking policy, taking global leadership in areas like plain packaging and the indexation of tobacco excise rates to affordability. Australia has adopted numerous non-fiscal tobacco-control measures, many of which are consistent with the Framework Convention on Tobacco Control (FCTC). These strategies were bought together under the National Tobacco Strategy 2012–2018. They have included graphic health warnings, advertising bans, and the prohibition of smoking in public spaces.
Meanwhile, tobacco taxation policy continues to play an important role in reducing demand for tobacco in Australia. The country has accelerated tobacco excise rates, starting with a 25 percent hike in 2010, followed by 12.5 percent annual increases from 2013 through to 2020. These tax increases are additional to the bi-annual indexation of rates each March and September. The overall effect has been a substantial rise in the tax component of retail cigarette pricing. While this brings Australia closer to the 70 percent tax target suggested by the World Health Organization, it may also heighten incentives for criminals to expand the illicit tobacco market. Historically, Australia has administered tobacco taxes through a series of licensing and permission-based regimes that seek to facilitate dealings by lower-risk entities and to prevent or tightly control commerce involving higher-risk entities. To manage tobacco tax collections, Australia has a set of regulatory controls administered by its domestic tax agency, the Australian Taxation Office (ATO). These controls recognize that tobacco could, in principle, be either grown and manufactured locally, imported as finished goods, or imported as leaf for final manufacture in Australia. In practice, since 2015, the licit tobacco market in Australia is comprised exclusively of imported finished tobacco products (e.g., cigarettes). All legal domestic tobacco growing and manufacture have ceased. Of note, Australia’s tobacco-trade controls do not extend to the use of fiscal markings such as tax stamps, or to the application of track-and-trace technologies to confirm the tax status of tobacco products in the supply chain.